By Donald C. Dowling, Jr., White & Case, New York
Most every country imposes wage/hour laws that regulate minimum wages and overtime pay as well as (in most countries) holiday pay, vacation pay, rest breaks and total hours worked. Usually these wage/hour laws reach not only locally hired staff but also inbound expatriates whose places of employment have become the host country. But the analysis as to which wage/hour laws apply gets murky as to business travelers and temporary guest workers—staff whose regular place of employment remains the home country but who spend time working abroad. Whose wage/hour laws apply to travelers working temporarily overseas?
This question is important in the United States, where wage/hour law compliance gets a lot of scrutiny and class actions under the Fair Labor Standards Act [FLSA] pose a real threat. But this question is perhaps even more vital abroad, because wage/hour laws in other countries can be much broader than stateside, offering fewer exemptions while imposing extra requirements like holiday pay, vacation pay and caps on hours worked. Also, wage/hour class actions exist even outside the United States (such as in Australia, Canada, India, Poland and some other countries), and in jurisdictions like Brazil, individual wage/hour lawsuits are extremely common. Further, many countries actually criminalize wage/hour violations: In Canada, Croatia, France, Greece, Korea, Latvia, Serbia, Slovakia and elsewhere, a boss who violates wage/hour laws in theory (and occasionally in practice) goes to prison.
The problem of which country’s wage/hour laws reach business travelers and guest workers is more complex than it may seem because the wage/hour laws of any country can reach both outbound and inbound business travelers. And so a quick in-and-out overseas business trip can implicate two countries’ wage/hour rules: Home-country wage/hour laws can reach an outbound traveler on home-country payroll, while that same traveler may fall under host- country wage/hour laws as an inbound worker. Most jurisdictions’ wage/hour laws tend to reach inbound business travelers and guest workers because of the strong public policy in play here—no jurisdiction wants low-wage-earning or long-hour-working foreigners coming in and undercutting the locals.
Because two jurisdictions’ laws are usually in play at the same time, choice-of-wage/hour law as to business travelers and guest workers gets even more complex than choice-of-law as to other aspects of employment law, like unionization, discrimination, mandatory beneﬁts and severance pay rules. To understand which wage/hour laws reach an international business traveler or guest worker working only temporarily overseas, break the analysis into two parts: compliance with home-country (outbound) wage/hour laws and compliance with host-country (inbound) wage/hour laws.
Compliance With Home-Country (Outbound) Wage/Hour Laws
To what extent do wage/hour laws of an international business traveler’s or guest worker’s home (payrolling) country reach overseas and regulate how the traveler must get paid and treated during the time worked abroad? When the home or payrolling country is the United States, this question primarily implicates compliance with the FLSA. And every FLSA inquiry begins with the question of whether the employee is exempt. Most international business travel outside the United States seems to involve FLSA-exempt staff. In those cases, the U.S. wage/hour law issue drops out.
As to non-exempt American staff who set off abroad on short- term business trips or overseas stints as guest workers, the FLSA reaches each week in which a traveler works on U.S. soil for just one hour. Whenever a non-exempt U.S.-based U.S.-payrolled employee spends part of a workweek working stateside and part of that same week working abroad, FLSA computation rules— including FLSA overtime and travel-time rules—reach all work and compensable travel time outside the United States for that week. Non-exempt U.S.-based employees escape the reach of the FLSA only during entire weeks worked abroad. (29 USC. §213(f); 29 C.F.R. §776.7; US Dep’t of Labor Wage and Hour Division Field Operations Handbook (5/16/02) [DOL Handbook] at § 10e02; Cruz v. Chesapeake Shipping, 932 F. 2d 218, 226 (3rd Cir. 1991); Wright v. Adventures Rolling Cross Country, Inc., 2012 US Dist. LEXIS 104378 (N.D. Cal.); Torrico v. IBM, 213 F. Supp. 2d 390, 402 (SDNY 2002) (dictum))
However, U.S. federal FLSA analysis is only part of the American- law compliance issue here. Remember state wage/hour laws. Even where an outbound non-exempt American business traveler or guest worker escapes the FLSA, the relevant U.S. payrolling state’s wage/hour law might reach abroad. This is the case, for example, in Pennsylvania (Truman v. DeWolff, Boberg & Assoc., 2009 WL 2015126 (W.D.Pa. 7/09)), but not in California (Wright, supra).
What about outbound business travelers and guest workers based outside the United States? For them, analyze the extraterritorial reach of home-country wage/hour laws. Brazil and Venezuela extend all their employment protection laws extraterritorially, so these countries’ wage/hour laws protect local staff traveling abroad on business. Taking Spain as another example, most Spanish employees are subject to a 40-hour capped week with only limited allowance for overtime. A Spanish employee traveling abroad for work carries this 40-hour cap with him—Spain’s labor code makes no exception for overseas trips. (Spain Workers’ Stat., Royal Decree 1/1995 of 3/24, at § 34.1)
Compliance With Host-Country (Inbound) Wage/Hour Laws
The tougher question as to business traveler and guest worker wage/hour compliance is how the wage/hour rules of a host country reach an inbound business traveler or guest worker whose principal place of employment and whose payrolling country, notwithstanding the trip, remain the home country. As a matter of public policy (the always-compelling policy of stopping low-wage and long-working foreigners from coming in and undercutting locals), many jurisdictions extend their wage/ hour laws even to temporary business visitors and guest workers visiting temporarily on short trips—travelers who, as mere visitors, do not fall under other host-country employment rules like local unionization, discrimination, mandatory beneﬁts, and severance pay laws.
The United States falls squarely among these jurisdictions: Under the FLSA, a visiting alien who comes stateside for just 72 hours and works on non-exempt tasks is protected under U.S. wage/ hour law—and so must receive FLSA minimum wages and FLSA overtime pay. (DOL Handbook, supra, at § 10e01(c)) Or take Abu Dhabi. The temporary Abu Dhabi work visa (the “Work Mission Permit”) expressly subjects even short-term visiting inbound guest workers to local UAE wage/hour law. (Business travelers and guest workers, of course, always need any required visa or work permit.)
Compliance is a separate issue. Maybe lots of business travelers and guest workers the world over go off to work on trips to foreign countries but never see their pay (delivered via home- country payroll) bumped up to meet host-county (foreign) wage/ hour mandates. And maybe they work long hours on these trips in violation of host-country caps on hours. But any employer of international business travelers or guest workers concerned with full compliance needs to account for this compliance issue. To ﬂout host-country wage/hour laws as to covered inbound business travelers and guest workers is illegal, a violation of most compliance policies—and a risk factor inviting pay disputes with both home- and host-country staff and local unions in both countries.
How does a host (payrolling) country employer comply with wage/ hours laws of the countries where it temporarily sends business travelers and guest workers? To answer this, ask four questions:
1. Who is exempt?
The ﬁrst question in wage/hour compliance analysis should always be: Who is exempt? In the inbound business travel context, ﬁrst check whether the host country happens to offer some targeted exemption for incoming business travelers or guest workers. Does the host country allow an exemption for short trips analogous to work visits shorter than the U.S. 72-hour cap? If no traveler exemption applies, then the exemption analysis shifts to the deﬁnition of “exempt” work under local wage/hour law.
A common mistake here is assuming that U.S. “exempt” workers carry their U.S. exemption everywhere they go. An outbound American business traveler may be FLSA-exempt when working domestically stateside, but U.S. exempt status stops at the border. U.S. exempt status tells us absolutely nothing about whether a traveler is exempt under wage/hour law in a host country.
In fact, America’s FLSA “exempt” category is unusually broad by international standards, which means that a given U.S.-exempt worker may well not be exempt abroad. For example, Mexico and Vietnam offer no statutory wage/hour law exemptions at all. Brazil’s wage/hour law (Labor Code art. 62) reaches even managers and supervisors, although Brazil does exempt high-level directors and executives with ﬁscal powers. Japan’s wage/hour law exemption reaches only what the Japanese call “true managers,” who are above mid-level supervisors. China’s overtime exemptions are complex and depend on whether the employer uses a so-called “standard working time system,” a “ﬂexible working time system” or an “integrated calculation working time system.” (That said, China is less likely than other countries to extend its wage/hour laws to non-citizens working in-country temporarily.)
Some countries do offer broad U.S.-style wage/hour exemptions. Exempt status in Ethiopia, Indonesia and Peru, for example, is roughly similar to America’s FLSA-exempt status. Malaysian wage/ hour law exempts everyone other than manual laborers who earn less than a meager monthly pay rate of MYR 2,000 (U.S.$621). India offers exemptions for everyone other than usually low wage- earning “workmen.” In the UK, certain provisions in wage/hour law drop out entirely if the employee has signed a binding opt-out— and so an employer of business travelers and guest workers sent into the UK might consider having even travelers sign UK-style opt-outs.
2. What is the cap on hours?
Our second question is: What is the host country’s cap on hours? The United States does not impose any ﬂat cap on hours worked (a stateside boss can legally assign, say, 100, 120 or more hours in a week). And so Americans are prone to missing the hours-cap issue entirely.
Many other countries impose ﬂat caps on hours worked. Famous, of course, is France’s 35-hour capped workweek. The French cap has now become riddled with complex work-arounds, but subject to those work-arounds, most French employees’ workweeks really are capped at just 35 hours. In 2013, Venezuela implemented a tough new wage/hour law called the LOTTT that imposes a ﬂat cap of 8 hours per day and 40 hours per week, with only a few exceptions.
Ontario’s Employment Standards Act 2000 imposes a ﬂat cap of 8 hours/day and 48 hours/week (and exceptions require advance clearance from the provincial Ministry of Labour plus employee-signed revocable opt-outs). Mexico, Germany and Hungary impose weekly ﬂat caps of 48 hours, although Hungary allows for 200 hours of overtime per year. Austria and Bahrain impose absolute weekly caps including overtime of 50 and 60 hours, respectively. Japan requires that hours caps be set out in labor/management agreements called saburoku kyoutei.
This said, though, distinguish a true hours cap from a mere target or reference period. Human resources staff in some countries may talk about legally mandated hours caps, but on closer examination these sometimes turn out to be mere reference periods. For example, Australia’s Fair Work Act 2009 at § 62(1) imposes a 38-hour standard workweek—but allows for “reasonable” “additional hours.”
3. What is the premium pay rate?
Our third inbound business traveler/guest worker wage/hour compliance question is: How does an employer compute pay for overtime and holiday time legally worked in-country? America’s time-and-a-half overtime rate is the general rule in some other countries—Luxembourg and Saudi Arabia, for example. But time- and-a-half is far from universal. In Argentina, Mozambique and elsewhere, some overtime work pays double-time. In Vietnam, holiday work can get paid as quadruple-time. Holiday work in Ethiopia pays at 250 percent.
Still other jurisdictions impose premium rates of less than time-and a-half: Peru’s overtime rate is 125 percent for the ﬁrst two daily overtime hours, then 135 percent. Luxembourg has an alternate 140 percent rate applicable in certain circumstances. Japan has several rates, from 125 percent to 160 percent, depending on when the overtime gets worked. Denmark, Germany and Hong Kong impose no statutory overtime pay premiums at all— but many local collective bargaining agreements in these jurisdictions do.
4. What other issues arise under local wage/hour law?
Finally, when analyzing overseas wage/hour compliance, be sure to ﬁnd out: Beyond overtime pay and caps on hours, do any other host-country wage/hour rules reach inbound business travelers and guest workers? For example:
• Travel time: In the business-trip context, always check how travel time gets compensated, and whether local travel time rules reach inbound business travelers and guest workers.
• Night work: Check regulations on night work, which can be especially strict in some jurisdictions (for example, Turkey). Japan imposes a pay premium on “late night” work (10:00 p.m. to 5:00 a.m.) which reaches even “true managers” who are otherwise overtime-exempt.
• Women: Countries like Saudi Arabia still impose protective legislation limiting work hours of women—and these laws rarely exempt inbound female business travelers.
• Breaks and rest periods: Check local rules on break time including mandatory prayer breaks in Muslim countries, and rest periods between shifts. These rarely exempt inbound business travelers and guest workers. For example, Mexico has a restrictive mandate as to paid meal breaks, and Poland requires 11-hour rest periods between shifts plus one weekly 32-hour rest period. Across the European Union, staff must get a break during each shift of six or more hours. (EU Directive 2003/88/EC, art.4) Brazil prohibits most work on Sundays. (MTE Portaria #375 of 3/21/14), as do many other countries.
• Minimum wage: Because staff at the bottom end of the wage scale rarely travel on overseas business trips, minimum wage is rarely a compliance issue in the international business travel context. But sometimes minimum wage comes into play, such as when a multinational services company based in a low-wage country wins a contract performed in a high-wage country. Occasionally this issue reaches American employees traveling abroad, because minimum wages in some countries outstrip the U.S. minimum. In 2015, Germany will introduce an hourly minimum wage of €8.50 (U.S. $11.50). In May 2014, Switzerland held a national referendum to impose a new Swiss national minimum wage of 22 francs (U.S.$24.65). This would have been the highest minimum wage in the world, but Swiss voters rejected it.
• Collective agreements: Check applicable local collective bargaining agreements, which can impose tougher wage/hour rules. For example, the Luxembourg Collective Bargaining Agreement for Bank Employees 2014 – 2016 contains seven pages of wage/hour provisions (articles 6 – 8), including a rule requiring triple-time pay for work on public holidays. Unions do not want visitors to come in and steal work away from their members, so wage/hour clauses in collective agreements are likely to reach even inbound business travelers and guest workers outside the “bargaining unit.”
• Payroll: Check whether local payroll laws, like those in Belgium, force an employer to “migrate” even guest workers onto a local payroll, and then to make local withholdings.